NI fund: A broken contract

I agree "that decisions must be taken in a responsible manner and within the context of their financial impact." (Social Solidarity Minister Dolores Cristina, June 29).

I further agree that this principle should have been adopted all along through the years in accruing a healthy balance in the National Insurance Fund/Account/Statement in terms of SSA 1987.

As the official records show, the N.I. Fund, on many occasions, had a healthy balance, and instead of it being invested for future pensions, it was transferred or "shifted" to other non-contributory benefits/ schemes or to the Consolidated Fund.

In fact, the Pensions Working Group - composed of experts in the social security field, and indeed gentlemen of high esteem - had stated in their Final Report:

"It is pertinent to underline that to date successive administrations have failed to establish a pension fund. Rather, revenue generated from contributions, which are specifically meant to contribute to one's pension income, are directed into the Consolidated Fund to finance general government activity.

In truth, successive administrations have failed to manage contributions related to pensions as an investment directed to secure the maximum return to a person".

The constituted bodies had also stated that "...it is not acceptable that contributions paid specifically for pensions are used to finance other expenditure - socially justifiable as such expenditure may be". In fact, within this context, the balance in the NI Fund/Account/Statement - call it what you may, it will always be a fund once contributions are paid in and contributory benefits are paid out - for the past 10 years would amount to around Lm250 million.

But various administrations had to find refuge in other non-contributory schemes so that the 10,000 service pensioners who are being robbed of part of their two-thirds pension - because of a service pension - could not claim that the NI Fund had an end-of-year balance.

The truth is that various administrations had abusively treated the National Insurance contributions as taxes, and hence thought they could use such funds when and where they wanted to.

But, as one of the esteemed gentlemen of the PWG said: "The thing to remember is that social security contributions are not a tax. They are the basis of a contract between the person who pays and the government for a pension to be paid to that individual, and this contract is not being kept, in the sense that you have no idea where your money is going... It is not going towards your pension, but could be paying for roads or hospitals or whatever.

The reform would ensure that what you pay goes into your pension."

So much for financial responsibility and appropriateness. Affected pensioners and some officials of the National Association of Pensioners please note.